Roleplay is founded on cheating
One of my favorite rubrics to taunt fellow roleplayers with is that we're all cheaters. Don't believe me? Follow me for a moment. In most circles in which I've ever played a character-based game, it is considered cheating to use out of character information for in character purposes. While using OOC information IC is sometimes candy-coated to be called "metagaming," that's still basically cheating.
Now take a look at the groups of miscreants with whom your character tends to hang out. Notice anything in particular about them? I'm guessing that your characters all tend to hang out with the characters of people with whom you enjoy roleplaying. Lord knows, I've not roleplayed a character in years that doesn't play alongside one of my wife's toons.
And that is an out of character dynamic (i.e., I like playing with my wife) affecting an in character action (i.e., my characters hang out with her characters). Sure, it's totally acceptable. I don't think there's a roleplay court in the land that would convict me of cheating for playing with my beloved wife ... but it's still, fundamentally, OOC affecting the IC.
There is a relationship between IC and OOC
My point here isn't to make roleplaying out to be some illicit activity. Let's save that for Goldshire. Rather, the point is that there is a very legitimate and necessary relationship between in character events and out of character events. Heck, I suppose someone could make a fairly effective argument that in a tabletop game, the game master (or dungeon master, if you're old school) is an out of character dynamic affecting the in character landscape.
The OOC drives the IC. Fundamentally, the players all must agree on what game they're playing, what the rules of their engagement are going to be like. This is an OOC agreement, of course, but it's one that determines the IC interaction. If your players all agree their particular sandbox won't use heavy NPCs like Varian Wrynn or Thrall, then someone playing outside that agreement will seem like a godmoder.
Other out of character dynamics absolutely should affect the IC play. Like I said before, I play with my wife. I don't engage in any activity I can't share with her; my characters are therefore likely to interact with hers. I also tend to play with my friends; after all, I'm playing a social game to be social with those people. So, there's an affect.
Places OOC bleeds over where it shouldn't
One of my first lessons about being a game master came in college. (You don't need to know how long ago, except that it involves the early 90s.) A dashing gentleman named Paul told me over an omelette at our local gaming hangout, "Mike, NPCs always act as the voice of the game master, even if you don't want them to."
It stuck with me. And I've seen it happen over and over; the game master attempts to innocuously use an NPC, and that NPC's language is taken as law. Or, if one player character beats up on the other player character, the players then tend to get their emotions wrapped up in the interplay.
The problem, again, isn't that anyone's cheating. But we're roleplaying characters, and the IC versus OOC lines can be really, really thin. We constantly have to be aware that we're making impressions on one another, and if we don't want our out of character real selves confused for the IC Azerothian native, then we should take steps to further than divide. It's one of the reasons I advocate using the "mun" method of player identification; there should be no need to associate ourselves with our IC action.
What you can do
Obviously, there's a difference between in character and out of character. IC is what your character does and believes. OOC is what the player does and believes. The two should stay as separate as possible.
However, by virtue of being aware that the IC to OOC divide is very very thin, we can help mitigate any possible issues. Take the time to reassure the other player that "this is just my character." Share the love, and share it often.
Switch toons often. Think I'm crazy? Taking the time to switch perspectives and, more importantly, the behavior you're emoting as the character will help cement the idea that you are portraying a character, not just living some kind of escapist perfect reality.
Of course, you may decide that you don't care if people get your IC and OOC mixed up. If so, my hat's off to you. But for most, it'll probably be best to help spell out what's in character, what's out of character, and keep confusing of the two to a minimum.
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